ARMENIA’S CREDIT RATINGS DOWNGRADED
By Emil Danielyan

Asbarez
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Au g 14, 2009

A leading international risk assessment agency lowered Armenia’s
debt rating by one notch late on Thursday, citing the severe impact
of the global recession on the local economy.

In a statement cited by the AFP news agency, the Fitch Group said
it has downgraded Armenia’s long-term foreign and national currency
Issuer Default Ratings to "BB-" from "BB."

"The severity of the shock has materially weakened Armenia’s credit
fundamentals and medium-term prospects," Andrew Colquhoun, the director
of Fitch’s Sovereigns Group, was quoted as saying. "Unlocking Armenia’s
economic potential and restoring strong and sustained growth necessary
to reduce poverty and raise incomes will be much harder as a result
of the crisis."

Fitch had given the country "BB" ratings, indicating "stable outlooks"
for the local monetary system, in early March. The economic situation
has severely retrogressed since then.

Official statistics show the Armenian economy contracting by 16.3
percent in the first half of this year. The Armenian government says
the full-year decline will ease to 12 percent thanks to its anti-crisis
measures largely endorsed by the International Monetary Fund and the
World Bank.

Fitch was more pessimistic on that score, predicting a GDP drop of 15
percent for 2009. That, it said, is "the third-worst outcome expected
for any Fitch-rated sovereign." It argued that the South Caucasus
country is highly dependent on external financing and large-scale
remittances from its citizens working abroad.

The downgrading of Fitch’s ratings, which assess the capacity of
a borrower to repay its debts, came after Armenia received over
$1.1 billion in emergency loans from the IMF, the World Bank and
other foreign sources to cope with the fallout from the global credit
crunch. The authorities in Yerevan hope to attract hundreds of millions
of dollars in additional loans in the months to come.

Their 2009 borrowing has nearly doubled Armenia’s external debt,
raising concern about their ability to manage the increased debt
burden. The authorities insist that the country will have little
trouble servicing the debt, arguing that it was equivalent to just 13
percent of GDP last year. A senior World Bank official cautioned last
month, however, that successful debt servicing will require improved
tax collection and renewed economic growth.